r/valueinvesting
ADBE: Still a buy?
Author doubts ADBE's rebound due to heavy AI spending hurting near-term ROI, executive exits, and negative reflexivity from falling prices.
- AI models are hard to use and expensive to run, protecting ADBE's market share.
- Current valuation is considered attractive for value investors.
- Ongoing share repurchases benefit existing shareholders.
- 'All-in' AI strategy will likely hurt near-term ROI and trigger investor concerns over costs.
- Executive departures (CEO/CFO search) signal leadership instability.
- Falling stock price creates negative reflexivity, hurting sentiment and making buybacks financially detrimental if prices keep dropping.
I own some ADBE at what I assumed was an attractive price. I do not think AI will steal a meaningful amount of business from them (image and video models are not easy to use and are very costly to run), so don’t agree with that portion of the bearish narrative. The CEO (and now CFO) search is a real concern.
However, I now question ADBE’s ability to reverse its price decline for two reasons:
On the earnings call, management stated they are going all in on AI. I made a post yesterday about how I don’t think AI investments with lead to positive ROI in the near term, and that investors will become alarmed by this at some point. The narrative will flip at some point to cost management. I understand they have to lean into the trend, but going all in sounds like Salesforce’s pivot to mentioning agents every 3 words (which is causing Salesforce’s margins to go to zero).
At a certain point reflexivity kicks in. Declining price hurts investor sentiment more, customers start wondering if alternatives really are better, management starts leaving (CFO just left). On top of that they are doing share repurchases, which is good for holders but bad for the financials if the price keeps declining.
Perhaps a more conservative way to frame this is: Will the price rebound be smaller the further it goes, for the reasons mentioned above.
The frontier model companies are moving away from creative gen to focus on coding in response to constraints on compute and electrical bandwidth. Adobe is well positioned to swoop in and vacuum up a significant portion of the demand those other companies created and then abandoned.
Anthropic jumped ahead because they were the first to realize that is a large TAM that can at least start to be addressed now. Sam altruism probably threw scalding hot coffee on an intern when he first heard Claude codes growth. Likely fired sora first for using too much of the AIs, then fired the intern intern to avoid a workmans comp claim
This subreddit would be so much better if I could filter/hide any post based on stock ticker.
You can just skip them. Comments not required
We’re getting like 4 ADBE posts a day. It’s a waste of
keep selling. I am ready to buy more.
How about 1onc a year
No
https://www.reddit.com/r/ValueInvesting/s/bCRAyJ1NZH
Explain? Or are you just saying no looking at the price chart going down?
Straight to the point
It feels like catching a falling knife lol. I never liked Adobe because it doesn’t really have a strong lock on its customers the same way that Microsoft, Crowdstrike, etc. do.
People don’t like Adobe and it’s not the same as people disliking ServiceNow or Salesforce, Adobe has to compete with services that are easier to use like Canva or AI image generation.
Maybe this generation sticks with Adobe, but Canva and AI image platforms nibbling at Adobe’s market share all around means that the following generations could use those over Adobe.
It’s not a safe enough value play for me, it’s not a buy at all. It hasn’t demonstrated enough to dispel the bearish worries.
Declining business
Sentiment at bottoms look like this btw. I bought